United Parcel Service Inc., Atlanta, is “concerned about the viability of the pension promises” to UPS employees who belong to the $20.7 billion Central States, Southeast & Southwest Areas Pension Fund, Rosemont, Ill., said Norman Black, UPS spokesman, about contract negotiations between the company and the International Brotherhood of Teamsters, Washington.
“One of the issues for us is pensions for UPS employees who are members of the Central States plan,” Mr. Black said. “We are concerned about the viability of the pension promises to those employees. Beyond that, I couldn’t go into any detail.”
Mr. Black declined to confirm that UPS seeks to withdraw from the Central States plan and set up a new plan for those employees.
The Teamsters union is demanding in contract negotiations that UPS raise its contributions to all members’ pension, health and welfare plans, despite a company proposal to withdraw from one of the biggest of those plans, the Central States fund, James P. Hoffa, general president of the International Brotherhood of Teamsters, Washington, and co-chairman of the Teamsters National United Parcel Service Negotiating Committee, said in a statement.
“It was the company’s proposal to leave Central States, not the union’s,” Mr. Hoffa said in the statement. “UPS made an internal financial decision that should not be counted as part of the final economic settlement. We are still expecting major economic improvements if we are to reach an agreement.”
In the negotiations, the union is “demanding a contract that provides more company contributions toward all members’ pension, health and welfare plans than any other UPS contract in history,” Mr. Hoffa’s statement said. The Teamsters didn’t give an amount.
UPS is proposing to create “a new joint union/company-administered pension fund for those workers formerly covered by Central States,” the statement said. “In return, the company will pay billions of dollars to cover its withdrawal liability” from the Central States plan.
“Whatever the company pays for its withdrawal liability cannot be deducted from the overall economic package contained in the agreement,” Mr. Hoffa said in the statement.
Mr. Black declined to discuss details of the contract negotiations.
UPS is the biggest contributor to the Central States fund, and UPS employees account for the largest number of Teamsters members. UPS contributes to 21 Teamsters jointly trusteed plans, Mr. Black said.
UPS, which doesn’t break out contributions by Teamsters fund, contributed $1.4 billion in 2006 to multiemployer pension funds, largely the Central States and other Teamster plans, according to its 10-K filing with the Securities and Exchange Commission. That contribution is a 14% increase from the $1.2 billion it contributed to multiemployer plans in 2005.
More contributions
The Central States plan is 60.5% funded as of Nov. 1, 2005, according to a Teamsters November 2006 report. To improve funding, the plan is seeking to increase contributions.
Aside from the Central States fund, the two other largest Teamster funds to which UPS contributes are: the $30.2 billion Western Conference of Teamsters Pension Trust Fund, Seattle, and the $3.4 billion New England Teamsters and Trucking Industry Pension Fund, Burlington, Mass.
The Western Conference plan no longer had an unfunded liability as of 2006, and “this means there is no withdrawal liability for employers who withdraw from the plan in 2006,” it said in a report.
UPS hasn’t indicated it is seeking to withdraw from other Teamsters plans, based on Teamster statements.
The Teamsters have set an Oct. 1 deadline to reach an early contract agreement it can recommend to members, Mr. Hoffa said in the statement; the UPS/Teamsters contract expires next Aug. 31.
“We are optimistic we can get an early agreement, and it can be done by Oct. 1,” Mr. Black said.
Mark Angerame, Central States chief financial officer, could not be reached for comment.
Galen Munroe, Teamsters press secretary, declined to comment beyond the statement.
